The present invention relates to the field of card-based transactions and accounts. More particularly, the present invention relates to a method and apparatus for providing to a consumer increased control over his or her accounts for card-based transactions.
Retail merchants have granted charge privileges to their customers for centuries. Small stores, in which the proprietor dealt personally with customers, characterized retail trade until about a century ago. When a customer wanted to charge a purchase, the owner simply made an entry in a ledger book to record their purchase.
The last years of the nineteenth century and beginning years of the twentieth century saw the rise of the department store. These giant, new stores became popular with consumers by offering a wide variety of merchandise under one roof.
Department store owners realized that they needed to grant charge privileges just like small shops. But rather than interacting with a small store's proprietor directly, consumers now interacted with a new type of employee, a sales clerk. Sales clerks at large, busy department stores could hardly be expected to know each customer by name the way small shop owners did.
This led to the development of the charge card, a wallet-sized card that identified customers as having a charge account at the store and provided either their name and address or an account number linked to them. Charge cards quickly evolved into metal plates with the consumer's identification embossed on them so that it could be imprinted on a cash register receipt or charge slip.
Starting in the late 1950s and early 1960s, a new type of card appeared, bank-issued credit cards. These cards had two unique features: they were issued by banks with the intention that they could be used at a variety of stores, restaurants, and other retail establishments; and they were credit cards rather than charge cards. They offered the consumer a line of personal credit and did not have to be paid in full every month, as did charge accounts. Since the 1980s, even more forms of cards have appeared: automated teller machine (ATM) cards and debit cards. In contrast to credit cards, these cards directly debit the owner's bank account for a transaction. Collectively, these different types of cards can be referred to as transaction cards, examples of which include debit, ATM, credit, charge, and entertainment cards. Use of these transaction cards can be referred to as card-based transactions.
Transaction card usage is so universal today that according to the Nilson Report, an industry newsletter, 96% of all retail transactions in the United States involve the use of transaction cards. As credit and other forms of transaction cards spread, issuers (typically banks) quickly banded together into associations that could accept and clear transactions from other member banks, allowing cards to be used across wide geographic areas. Eventually, these became today's giant associations such as Visa® and MasterCard®.
Issuers soon discovered a dark side to the universality of transaction cards: they could be stolen and thieves could quickly run up immense charges against the card. Even consumers could go on a spree and quickly exceed their credit limit. Banks set up toll-free telephone numbers which merchants were required to call to get approval for transactions in excess of a “floor limit” (typically, about $50). Eventually, magnetic strips encoded with account information (e.g., the cardholder's name and the credit card number) were added to cards and simple, low-cost terminals were developed to read the cards, send transaction information and receive approval automatically. Today, virtually every time a customer presents a card to a store cashier, the transaction is reported to a central clearing facility and checked for approval in real-time.
In a typical card-based transaction, the customer presents her transaction card to the merchant. The merchant then swipes the customer's card through a reader terminal which reads from the card's magnetic strip the customer's name, account number and card expiration date. In the case of a mail order or a telephone order (referred to as “MOTO”), the merchant manually keys this information into the terminal.
The terminal contacts the merchant's bank (referred to as the acquiring or accepting bank) and provides details of the transaction including the customer's information and additional information about the merchant and the transaction. This additional information may include the merchant's identification code, type of business (e.g., Standard Industrial Classification or SIC), location, and the amount of the transaction.
The acquiring bank then contacts the bank that issued the customer's card (referred to as the issuing or settling bank), typically through a card association's private network, and provides the information about the transaction. The issuing bank examines the transaction, checking that it does not exceed the consumer's credit limit and performing other checks such as for abnormal transactions indicating possible theft.
Approval of a transaction also reserves a portion of the consumer's available credit line for that transaction. This helps prevent cases where a merchant submits a transaction to the issuing bank only to have it returned because the customer has used up her card's available credit line.
Actual transactions are batched together and forwarded nightly by the merchant to his acquiring bank. His bank account is credited with the amount of the transactions submitted, less a per-charge processing fee. The acquiring bank then sends batches of transactions to each issuing bank via the card association's private network and accounts are settled nightly between banks.
Sometimes the amount of a transaction may not be for the exact amount given when seeking authorization for the transaction. One example is restaurant charges, where customers add tips to the charge slip. To match transactions to approvals even if the amounts do not match, the multi-digit authorization code is used to key transactions to approvals.
In a similar vein, some authorizations may not be for actual charges, but rather for approval and confirmation that the cardholder will be able to pay a certain amount at a later time if needed. Examples include damage deposits against rentals and guaranteeing the ability to pay on checkout when registering at a hotel. For this reason, authorizations also have expiration dates (typically a week after issuance); if a matching transaction has not been submitted by the merchant by that time, the authorization expires and the amount is restored to the consumer's available line of credit.
Telephonic transaction authorization has brought a variety of important benefits to banks and merchants. The cardholder's available credit is instantaneously reduced by the amount of the purchase, making it difficult for the cardholder or a thief to exceed the charge or credit limit on the card. Banks can also track card usage patterns; abnormal usage (e.g., atypical purchases or a sudden flurry of purchases in a distant city) can signal a stolen card.
All transaction cards issued by a bank are directly linked to a specific account with specific characteristics (e.g., a specified credit limit). While duplicate cards may be obtained, the duplicate card functions exactly as the original card. This leads to consumers having to carry a multitude of cards, one for each of their various credit and debit accounts. In addition, card-based transactions are approved or denied by the card-issuing bank solely based upon criteria determined by the bank. Accordingly, the consumer has little or no control of the approval or denial of a specific transaction. Therefore, what is needed is a technique for providing to the consumer increased flexibility and control over the use of transaction cards for card-based transactions. Preferably, such a technique would not require the consumer to carry a multitude of transaction cards. What is further needed is a technique for providing to the consumer increased flexibility and control over debit and credit accounts used in connection with such card-based transactions. It is to these ends that the present invention is directed.